B-320329, NeighborWorks America--Availability of Appropriations for Grants to Affordable Housing Centers of America, September 29, 2010

Subject: NeighborWorks
America—Availability of Appropriations for Grants to Affordable Housing Centers of America

Dear Mr. Bryson:

This letter responds to
your request for our views on whether NeighborWorks's appropriations are
available for grants to Affordable Housing Centers of America (AHCOA). Letter from General Counsel, NeighborWorks,
to Acting General Counsel, GAO, Re:
Request for an Appropriations Decision, relatedto funding Affordable Housing Centers of America (formerly known as
ACORN Housing Corporation, Inc.), Aug. 2, 2010 (Request
Letter). Specifically, you asked whether
NeighborWorks is barred from granting federal funds to AHCOA under section 418
of the Transportation, Housing and Urban Development, and Related Agencies
Appropriations Act, 2010: "None of the
funds made available under this Act or any prior Act may be provided to the Association
of Community Organizations for Reform Now (ACORN), or any of its affiliates,
subsidiaries, or allied organizations.” Pub. L. No. 111‑117, div. A,
title IV, 123 Stat. 3034, 3112 (Dec. 16, 2009).[1] After reviewing the record, it is our view
that AHCOA, as presently configured, does not fall within the scope of section
418 because it is not an affiliate, subsidiary, or allied organization of ACORN.[2]

In reaching our
conclusion, we developed our record by soliciting and receiving factual
information and legal views from NeighborWorks, AHCOA, and the Department of
Housing and Urban Development (HUD).[3] Because section 418 applies to HUD's
appropriations as well, HUD previously addressed the applicability of the
prohibition to AHCOA. HUD determined that
AHCOA is not an affiliate, subsidiary, or allied organization of ACORN.[4] We also reviewed
AHCOA's consolidated financial statements and a letter from the Internal
Revenue Service (IRS) regarding AHCOA's tax-exempt status.[5]

BACKGROUND

Neighborhood Reinvestment
Corporation, doing business as NeighborWorks America (NeighborWorks), is a
national nonprofit organization created by Congress to provide financial
support, technical assistance, and training for community-based revitalization
efforts. 42 U.S.C. sections 8101–8107. In establishing NeighborWorks, Congress
specified that "[NeighborWorks] shall not be considered a department, agency,
or instrumentality of the Federal Government.” 42 U.S.C. sect. 8104(e). Nevertheless, Congress appropriates funds
each year to NeighborWorks for, among other things, mortgage foreclosure
mitigation activities. See, e.g., Pub. L. No. 111‑117,
div. A, title III, 123 Stat. at 3107–08. In this regard, NeighborWorks administers the
National Foreclosure Mitigation Counseling (NFMC) Program and makes grants to HUD-approved
housing counseling intermediaries, State Housing Finance Agencies, and
NeighborWorks organizations that advise homeowners with mortgages in default or
in danger of default. See id., 123 Stat. at 3108.

One such grantee
under the NFMC Program was AHCOA.
Request Letter, at 2. AHCOA is a
national nonprofit and nonstock organization incorporated in Louisiana.[6] AHCOA was founded in 1985 by members of ACORN
and operated for decades as "ACORN Housing Corporation, Inc.” (ACORN Housing).[7] AHCOA has taken measures to sever its ties
with ACORN. For instance, AHCOA previously
contracted with ACORN offices to provide outreach services.[8] Under these agreements, ACORN referred
eligible homeowners to AHCOA and gathered intake documents for mortgage
foreclosure intervention and counseling.[9] AHCOA terminated its contract with ACORN in
September 2009 and certifies that the contract will not be renewed.[10]

In December 2009, AHCOA
changed its name from ACORN Housing and amended its Articles of Incorporation
and By-Laws to reflect the name change.[11] Upon AHCOA's request, ACORN also recently
sent the unpaid balance of an advance it received under a contract with AHCOA.[12] AHCOA and ACORN formerly both used Citizens
Consulting, Inc. (CCI) for financial, accounting, legal, and human resources
services, but AHCOA terminated its relationship with CCI over the course of
2007 and 2008.[13]

NeighborWorks has
awarded over $25 million in federal funds to AHCOA since 2008.[14]
After the enactment of section 418 of
the Transportation, Housing and Urban Development, and Related Agencies
Appropriations Act, 2010, NeighborWorks suspended its disbursement of NFMC
funds to AHCOA. Request Letter, at
2.

DISCUSSION

Although
NeighborWorks is a public, nonprofit corporation, not a federal agency, NeighborWorks
is similar to a federal agency in some respects. It is funded through annual appropriations;[15]
its Board of Directors consists of presidential appointees subject to Senate
confirmation or their statutorily designated representatives;[16]
it is required to submit an annual report to the President and Congress;[17]
its financial transactions are subject to audit by the Government
Accountability Office;[18]
and it must submit an annual budget to the Office of Management and Budget,
which the President may modify, amend, or revise.[19] NeighborWorks's appropriations are also
subject to restrictions in appropriation acts.
With this legal landscape, we turn to the question presented: whether AHCOA, as presently configured, falls
within the scope of section 418, which bars the distribution of federal funds
to "affiliates,” "subsidiaries,” or "allied organizations” of ACORN.[20]See Pub.
L. No. 111-117.

Our analysis
begins with the language of the statute and the meaning of the words
"affiliates,” "subsidiaries,” and "allied organizations.” See B-318831, Apr. 28, 2010; B‑303845, Jan. 3,
2006. When a word is not legislatively
defined, courts tend to construe it in accord with its ordinary, dictionary
meaning. Smith v. United States, 508 U.S. 223, 228 (1993) ("In the search
for statutory meaning, we give nontechnical words and phrases their ordinary
meaning.”); Perrin v.United States, 444 U.S. 37, 42
(1979) ("A fundamental canon of statutory construction is that, unless
otherwise defined, words will be interpreted as taking their ordinary,
contemporary, common meaning.”).

However,
if a word has a specific legal meaning, courts tend to apply that meaning when
interpreting a statute. United States v. Nason, 269 F.3d 10, 16
(1st Cir. 2001) (stating that "we presume, absent evidence to
the contrary, that Congress knew and adopted the widely accepted legal
definitions of meanings associated with the specific words enshrined in the
statute,” and referring to Black's Law
Dictionary for the "most widely accepted legal meaning” of a term). If the plain meaning of a word is
unambiguous, then our statutory interpretation ends there. BedRoc
Ltd., LLC v. United States, 541 U.S. 176, 183 (2004); B‑288658,
Nov. 30, 2001. Therefore, we look to the
common meaning of "affiliate,” "subsidiary,” and "allied organization.”

Affiliate

Black's Law Dictionary defines an affiliate as a
"corporation that is related to another corporation by shareholdings or other
means of control.” Black's Law Dictionary 67 (9th ed. 2009). See
Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 955 (9th
Cir. 2009) (noting that the Black's Law
Dictionarydefinition of "affiliate” is supported by the plain and ordinary
meaning of "affiliate”). Congress and federal agencies, in defining
"affiliate” in other substantive areas of law, similarly provide that an
"affiliate” is an entity (a) controlled by another entity; (b) in control of
another entity; or (c) under common control with another entity by a third
party.[21] "Control,” in turn, is defined as the "direct
or indirect power to govern the management and policies of a person or entity,
whether through ownership of voting securities, by contract, or otherwise; the
power or authority to manage, direct or oversee.” Black's
Law Dictionary 378. Federal statutes
and regulations defining "affiliate” for other purposes offer other indicia of
control, including influence over the election of the majority of the
other entity's Board of Directors;[22]
sharing the majority of its Board of Directors with another entity;[23]
interlocking management or ownership,[24]
shared facilities and equipment,[25]
or common use of employees.[26]

The record does
not show AHCOA to be directly or indirectly under the control of ACORN. AHCOA is not related to ACORN by
shareholdings. Because AHCOA is
organized as a nonstock corporation, ACORN cannot own shares in AHCOA. AHCOA Amended
Articles of Incorporation, at 2. AHCOA also does not own any shares
of ACORN. E-mail
from General Counsel, AHCOA, to Staff Attorney, GAO, Re: AHCOA Statement, Sept. 20, 2010. Further, AHCOA certifies the following facts:

Neither
ACORN nor any other organization has the authority to control the makeup of the
AHCOA Board of Directors.[27]

The Executive
Director of AHCOA "declare[d] under penalty of perjury” that these certifications
were "true and correct.” AHCOA
Certifications, at 5.[31] We see no reason, therefore, to disregard or
discount them, and conclude that AHCOA is not an "affiliate” of ACORN. We note that HUD, relying on these
certifications as well as information in its possession as a result of its
grant relationship with AHCOA, found no basis to contradict these
certifications either.

Subsidiary

The definition of
"subsidiary” is narrower than the definition of affiliate. A subsidiary is a
"[s]ubordinate; under another's control.”
Black's Law Dictionary 1565. As stated above, we concluded that AHCOA is
not presently under the direct or indirect control of ACORN.

The
word "subsidiary” is sometimes used as a shortened form of the term "subsidiary
corporation.” Id. A subsidiary corporation,
in turn, is defined as a corporation in which a parent corporation has a
controlling share, usually through ownership of more than half of the voting
stock. See Black's Law Dictionary 393–94.
AHCOA is organized as a nonstock corporation. AHCOA Amended Articles of Incorporation, at 2.
Consequently, it is not possible for any
individual or organization, including ACORN, to own any share of AHCOA. Thus, AHCOA is not a "subsidiary” of ACORN.[32]

Allied
Organization

Section 418 did
not define the term "allied organization,” nor did we identify any legislative
history that may help ascertain its meaning.
Also, we did not find the term "allied organization” in legal or general
dictionaries. Therefore,
we turn to other canons of statutory construction to help us understand the
meaning of "allied organization” in section 418.

The
meaning of a term that appears ambiguous in isolation may become clear when
analyzed in light of the terms that surround it. Smith,
508 U.S. at 229. A word in a list, in
particular, is given more precise content by the neighboring words with which
it is associated. United States v. Williams, 553 U.S. 285, 294 (2008). See
alsoSecurities Industry Association
v. Board of Governors of the Federal Reserve System, 468 U.S. 207, 218
(1984)(stating that it is a "familiar
principle of statutory construction that words grouped in a list should be
given related meaning”); Jarecki v.
G.D. Searle & Co., 367 U.S. 303, 307 (1961) ("a word is
known by the company it keeps”). Courts
often turn to the principle of ejusdem
generis as well, which states that general words in a list should be
construed as similar to more specific words in the list. In re Eilbert,
162 F.3d 523, 527 (8th Cir. 1998).[33]

With these canons
of construction in mind, we turn back to the term "allied organization.” The term appears in a list after the words
"affiliates” and "subsidiaries.” We have
previously defined "affiliate” and "subsidiary” to be a corporate entity that
is somehow related to another corporate entity.
Thus, applying the canons above, we can understand "allied organization”
in this context, that is, corporations that are financially or organizationally
related. We note that at the time
Congress enacted section 418, there were widespread allegations of misconduct
by ACORN and organizations working with ACORN.[34] In this regard, we think it is reasonable to
interpret "allied organization” to mean any corporation with whom ACORN had a
financial or organizational relationship, for example, through contracts and
grants. This interpretation is
consistent with the position taken by the United States in its brief in the ACORN case.Federal Defendants'
Memorandum in Opposition to Plaintiffs' Motion for Preliminary Injunction, at
28 (No. 7) (Dec. 1, 2009), ACORN, 692 F. Supp.
2d 260 ("Here, the terms 'affiliates' and 'allied organizations' appear next to
'subsidiaries,' in a funding statute, suggesting that Congress intended to
reach only those entities financially or organizationally intertwined with
ACORN with respect to federal grants.”).

In the past, after
AHCOA received grant funds, it contracted with various offices of ACORN to
provide outreach services for AHCOA. AHCOA
Certifications, at No. 24. AHCOA and
ACORN also used the same entity—CCI—for financial, accounting, legal, and human
resources services. AHCOA Certifications,
at No. 15. In fact, ACORN itself listed AHCOA
as an "allied organization” on an earlier iteration of its Web site. ACORN, Allied
Organizations,available athttp://web.archive.org/web/20080822090025/www.acorn.org/index.php?id=12375 (archived on Aug. 22, 2009). However, for purposes of the question at issue
in this opinion, it is not necessary to determine whether AHCOA, when formerly
operating as ACORN Housing, may have been financially or organizationally
related to ACORN.

At issue here is whether AHCOA is presently an allied
organization of ACORN. AHCOA has terminated its vendor contract with
ACORN and certifies that the contract will not be renewed. AHCOA Letter to ACORN; AHCOA Certifications,
at No. 24. ACORN recently returned
to AHCOA the unpaid balance of an advance it received under the vendor
contract. Letter from Director of
Operations, AHCOA, to Chief Executive Officer, ACORN, Re: Past Due balances owed to Acorn Housing Corporation, May 14,
2010; E-mail from CEO, ACORN, to Executive Director, AHCOA, Re: Debt Invoice, May 21, 2010. AHCOA also no longer acquires services from
CCI. AHCOA Certifications, at Nos. 15.–23.
For these
reasons, we do not believe AHCOA is presently an allied organization of ACORN.

CONCLUSION

After reviewing the
record, it is our view that AHCOA is not presently an affiliate, subsidiary, or
allied organization of ACORN. Accordingly,
AHCOA does not currently fall within the scope of section 418 of the
Transportation, Housing and Urban Development, and Related Agencies
Appropriations Act, 2010.

NeighborWorks has a
continuing responsibility in its grantmaking and oversight capacity to monitor
any changes that might implicate the prohibition and our conclusion here. We do not opine on AHCOA's eligibility for any
particular grant program or the economy, efficiency, or effectiveness of making
grants to AHCOA.

If you
have any questions, please contact Susan A. Poling, Managing Associate General
Counsel, at (202) 512-2667, or Thomas H. Armstrong, Assistant General Counsel
for Appropriations Law, at (202) 512-8257.

Sincerely,

Lynn
H. Gibson

Acting
General Counsel

[1] The bill for the Transportation, Housing and
Urban Development, and Related Appropriations Act, 2011, includes an identical
prohibition. H.R. 5850, 111th Cong.
sect. 416 (2010). In the event that
Congress enacts a continuing resolution for fiscal year 2011, the prohibition
in the fiscal year 2010 appropriations act would likely remain in effect during
the pendency of the continuing resolution.
See, e.g., GAO, Continuing Resolutions: Uncertainty Limited
Management Options and Increased Workload in Selected Agencies, GAO-09-879
(Washington, D.C.: Sept. 24, 2009), at 3 (explaining that continuing
resolutions "typically incorporate by reference the conditions and restrictions
contained in prior years' appropriations acts or the appropriations bills
currently under consideration”). See also B-316533, July 31, 2008
(concluding that a fiscal year 2007 appropriations restriction was still in
effect in fiscal year 2008 while the agency operated under a continuing
resolution).

[2] GAO issued a preliminary report in June 2010
on agency awards of federal funding to ACORN or potentially related
organizations from fiscal years 2005 to 2009, oversight mechanisms agencies
used when monitoring awards to ACORN or potentially related organizations, and
federal investigations and prosecutions of ACORN or potentially related
organizations. GAO, Preliminary Observations on Funding, Oversight, and Investigations and
Prosecutions of ACORN or Potentially Related Organizations, GAO-10-648R
(Washington, D.C.: June 14, 2010) (GAO ACORN Report). In accordance with a congressional mandate
and three congressional request letters, GAO is currently working on a final
report. See Pub. L. No. 111-117, div. B, title V, sect. 535; GAO ACORN Report,
at 2.

[4] Letter from
General Counsel, HUD, to General Counsel, AHCOA, June 1, 2010 (HUD Letter to
AHCOA). See also Letter from General Counsel, HUD, to Assistant
General Counsel for Appropriations Law, GAO, Re: Your Request B-320329; Availability of
Appropriations for Grants to Affordable Housing Centers of America, Aug. 30, 2010 (HUD Letter to GAO).

[7] Letter from General Counsel, AHCOA, to
General Counsel, NeighborWorks, Statement
of Affordable Housing Centers of America, showing that it is not precluded from
receiving federal funds, July 29, 2010 (AHCOA Statement). ACORN
is an organization with over 400,000 members in more than 1,200 neighborhood
chapters in about 75 cities across the country.
ACORN, Who is ACORN?, available at
www.acorn.org/about (last visited
Sept. 29, 2010).

[20] ACORN, ACORN Institute, Inc., and New York
Acorn Housing Company, Inc., filed a lawsuit in the U.S. District Court for the
Eastern District of New York challenging the constitutionality of section 418
and similar restrictions in other fiscal year 2010 appropriations acts. ACORN
v. United States, 692 F. Supp. 2d 260
(E.D.N.Y. 2010). On appeal, the U.S. Court
of Appeals for the Second Circuit held that the restrictions were not
unconstitutional bills of attainder and remanded the case to the federal
district court for further proceedings as to the plaintiffs' First Amendment
and due process claims. ACORN v. United States, Docket Nos.
09-5172-cv; 10‑0992‑cv (2nd Cir. Aug. 13, 2010), available at www.ca2.uscourts.gov/decisions/isysquery/913bc4ac-c159-4cb5-8f7a-b6b2c7c3a0cb/1/doc/09-5172-cv_opn.pdf
(last visited Sept. 29, 2010).

[31] AHCOA's certifications may be compared to an
affidavit, or a "voluntary declaration of facts written down and sworn to by [a]
declarant before an officer authorized to administer oaths.” Black's
Law Dictionary 66 (noting that a "great deal of evidence is submitted by
affidavit” in a typical legal proceeding).

[32]
The auditor's report of AHCOA's financial statements for fiscal year 2009 lists
four corporations as subsidiaries of AHCOA.
FY 2009 Consolidated
Financial Statement, at 10. It appears
that the auditor may have used a different definition of "subsidiary” than the
legal definition we use here. According
to AHCOA's General Counsel, three of the four corporations were nonstock
entities. Telephone Conversation,
General Counsel, AHCOA, Assistant General Counsel for Appropriations Law and
Staff Attorney, GAO, Sept. 27, 2010.
Accordingly, AHCOA could not have owned a majority share of these
corporations. One of the four
corporations was a stock entity at that time and AHCOA owned 100 percent of the
shares. Id. That corporation has
since bought back the stock from AHCOA and converted itself into a nonstock
corporation. Id. AHCOA's General Counsel
stated that these four corporations may be more properly described as
"affiliates” because AHCOA exercises some degree of control over them. Id. For example, at least one AHCOA employee is a
member of the Board of Directors of each corporation. Id. The question here, however, is whether
AHCOA is an affiliate, subsidiary, or allied organization of ACORN, not its
relationship with these four corporations.

[33]See
also Black's Law Dictionary 594 ("For example, in the phrase horses, cattle, sheep, pigs, goats, or any
other farm animals, the general language or any other farm animals — despite its seeming breadth — would
probably be held to include only four-legged, hoofed mammals typically found on
farms, and thus would exclude chickens.”).

[34] In September 2009, widely publicized
videotapes reportedly showed ACORN and AHCOA employees at various offices
giving improper advice to a woman and man posing as a prostitute and her
boyfriend. AHCOA Statement, at 8. Four AHCOA employees appeared in the
videotapes. Letter from General Counsel,
AHCOA, to Assistant General Counsel for Appropriations Law, GAO, Re: AHCOA's response to videotapes,
Aug. 20, 2010, at 1. Following the
release of the videotapes, AHCOA fired the four employees, retained an outside
firm to conduct an ethics seminar, issued a new ethics code of conduct, and
appointed an Ethics Officer. Id., at 2. The videotapes were subsequently reviewed by
officials in New York and California.
Both offices declined to take legal action after conducting
investigations.